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Labour manifesto: clawing back from the rich

Submitted by AWL on 17 May, 2017 - 10:16
Author: Martin Thomas

The output (value-added) of the UK economy these days is around £1900 billion a year. Of that, about £360 billion is goods and services bought by central and local government, about £320 billion is capital investment, and about £1,130 billion is stuff bought by households. The sub-totals do not add up to the overall total because of other categories, and the figures are rough, based on the last available official figures, for 2014.

The UK government produces many useful statistics on the distribution of household income, but not for the percentage of household income taken by the rich, the top 5%, and the fairly well-off, the top 20%. To get an idea, let’s borrow the US figures — 20%-plus of the total for the top 5%, 50%-plus for the top 20%. Historically, US income inequality has been greater than the UK’s, but the gap has decreased, and inequality between top and bottom incomes has been rising in a way that makes official figures, always produced after a delay, usually underestimates.

Household income and household consumption can diverge, especially for very high-income people who save a lot of their income, but the US figures will give us a ballpark estimate. A dozen complications make the figures inexact; but an inexact estimate of the shape of the forest can teach us lessons not visible from more precise statistics about the trees. If we subtract 20% from the employed-workforce total of 32 million for bosses and their high-paid associates, some 26 million workers turn out about £74,000 each in products and services.

Of each £74,000:
• about £22,000 returns as wage, benefit, and pension income to the lower 80%, mostly working-class households
• about £9,000 goes in household income to the top 5%
• about £12,000 to expanding capital, from which they benefit most
• about £13,000 in household income to the well-off-but-not-rich 15%
• about £14,000 in government purchases of goods and services, be that medicines for the NHS and books for schools, or Trident missile replacements.

Let’s say half to two-thirds of that £14,000 is health, education, and similar spending which should be counted as part of the social wage. That leaves over £40,000 of the average worker’s value-added going to the rich or well-off, to the expansion of capital controlled by the rich, and to the expansion of the power and pomp of the state. Or over £1,000 billion a year in total.

The figure is rough. But it gives a measure of the mendacity of the Tory propagandists who denounce Labour’s manifesto as made of “wild, uncosted spending commitments”.

To pay for:
• More than £6 billion extra per year for the NHS
• £8 billion extra for social care
• Reversal of the Tory school cuts
• Reversal of the Tory benefit cuts, including the bedroom tax and cuts to disability benefits
• Restoring student grants, and scrapping university tuition fees
• Ending the 1% freeze on pay rises for health and education workers

the Labour manifesto promises to:
• increase income tax for the top 5%
• reverse the Tories’ cuts in corporation tax.

It promises to take some tens of billions of pounds — John McDonnell estimates £50-odd billion — out of the £1,000 billion a year which currently goes to the rich and the very well-off, or to enterprises under their control.

Many other economic measures in the manifesto require little extra public spending. The government can readily borrow to build new council housing, and then by law council housing accounts are “ring-fenced”. Tenants’ rents cover the costs. In fact, more than that, since in recent years councils have been sneakily raiding their housing accounts by artificially increasing “service charges” paid from them to other departments. Abolishing tuition fees will cost little in current government spending. After tuition fees were raised, the Institute of Fiscal Studies reported “ the average total taxpayer contribution has not fallen very much”, since the government pays about as much on student loans for fees, and their administration, as it previously paid direct to universities.

Increasing the minimum wage to £10 an hour will force bosses to limit their profits and the amount they pay themselves, but that is all. The Picturehouse strikers have reported that the boss of Cineworld (which owns Picturehouse) could pay Picturehouse workers the Living Wage out of his own personal take, and still pocket £1 million. Repealing the punitive Trade Union Act, abolishing zero-hours contracts, and saying workers have “employee” rights by default (putting the burden on the boss to prove that they are not employees) will not tap public funds, but will help workers reduce inequality. Renationalising the railways, and launching publicly-owned energy companies, will limit privatised operators’ loot, but not cost taxpayers.

The moral and political content of the manifesto is the reduction of inequality. It is not to be counted in a few pounds here and a few pounds there. It is about changing towards a society of solidarity and cooperation from one where a rich few lord it over a majority who have to scrape and scrabble to find food and shelter, education and health care, or even to get a few hours’ work each week — where each one jabs their elbow in their neighbour’s face to get out of the mire and on to the high lands. It is about reversing the trends of the last near-forty years, since Thatcher.

When Thatcher took office in 1979, the ratio of incomes at the bottom of the top 10% to those at the top of the bottom 10%, the 90:10 decile ratio, was about 3. By the time she quit, in 1990, it was up to 4.5. Since then, and until now, Thatcher’s “neoliberal” mode of economic policy has dominated, with only slight inflections this way or that. Inequality has steadily drifted up to 5.3 now. Under the Blair and Brown Labour goverments, measures like the minimum wage and tax credits improved things for some of the very poorest, but inequality still rose, because the rich increased their loot much faster.

Under Thatcher, the very richest gained — individually, though not in terms of the society they were living in — and also a large group of upper-middle-income people. That has changed since the crash of 2008. The very richest quickly recovered their losses. The conservative Sunday Times headlined its report on its annual Rich List for 2017: “In a year of uncertainty, one thing was without doubt — Britain’s richest were getting richer... the total wealth of Britain’s 1,000 richest individuals and families soared to £658bn — a 14% rise on last year”.

Since 2008 both the worse-off and also middling-income people have seen at best stagnation. Real wages increased a bit, on average, in 2014-5 and 2015-6, thanks to some recovery in the world economy, but are still well behind pre-crash levels. Almost certainly they are already decreasing, and set to decrease further. No-one yet knows what the eventual Brexit deal will be like. But only the most fanatical ultra-market economists believed that Brexit could actually improve Britain’s overall income.

Their recipe is to slash all social and environmental regulations and protections, so that Britain becomes a high-profit, low-wage, high-insecurity, low-welfare platform for global capital, conveniently close to Europe. viable The main Tory leaders do not think that is viable. They know that, by diminishing and hindering trade, they will diminish economic life, to a yet-unknown extent. What justifies that, for them, is their mean-minded obsession with excluding migrants. Which will further diminish economic life, since those migrants are mostly young, keen, taxpaying workers, essential to many public services. The Tory future is grim.

That is why Theresa May has gone for an election now, and why she refuses to offer any substantial prospectus other than “strong and stable leadership”. It is why she refuses to rule out tax rises. The Resolution Foundation think-tank, analysing known wage trends and already-programmed benefit cuts, has predicted a rise in the 90:10 inequality ratio from 5.3 now to 6 in 2020, a faster rise even than under Thatcher. That is without taking into account effects from Brexit.

The choice at this election is between a “strong and stable” drive to make inequality even more hurtful, and an attempt to reduce inequality and institute some social solidarity and cooperation.

Explaining the Labour manifesto to workers who have been beaten down by years of Thatcher, Blair, and Cameron into believing that no plan for improvement can ever be true is a first step. It is not all. We need an active, mobilised, and lively labour movement to sustain the message, and to sustain and push a Labour government if we win one on 8 June.

The proposed clawback from the rich is moderate. In simple arithmetic, they could afford it easily — some tens of billions out of hundreds of billions of value which they siphon away each year. But the rich do not get rich, in a capitalist society, by being generous and easy. They get rich by being the people most ruthless in pursuit of greed, exploitation, trampling down and squeezing the working class.

What they say now, while they are still confident of a Tory victory, about Labour’s policies being “wild”, “ruinous”, “disastrous”, and “illegal”, is a pale anticipation of how they will react if Labour wins. They have a hundred levers of sabotage of an elected government — from “strikes” of capital, through top officials, to the Labour right — and they will use them.

In Solidarity’s view, even the moderate rebalancing proposed by Labour’s manifesto can be implemented thoroughly and securely only by a labour movement ready and willing to take economic power out of the hands of the ultra-rich, by workers’ control and social ownership across industry. The movement will become strong enough to do that only by uniting, now, to create and organisation in every workplace and working-class street capable of winning a majority for the manifesto and fighting the battles needed to implement it.